Overview
- The cabinet approved a package on Tuesday, Sept. 15, to cut the 8 percent levy on food and nonalcoholic drinks to 1 percent for two years beginning April 2027 and to add income-based payouts for lower- and middle-income households.
- The government said it will not use deficit-covering government bonds to finance the measures and will instead seek non-tax revenue and savings from reviews of subsidies and tax breaks, with detailed offsets to be decided by year-end.
- Estimates of the revenue shortfall vary across reports from about 5 trillion yen to roughly 10 trillion yen, and initial benefit payments are reported at about 600 billion yen a year for fiscal 2027–28.
- Markets reacted nervously to the approval, lifting the 10-year Japanese government bond yield above 3 percent and drawing criticism from international officials who warned the plan could worsen sovereign debt pressures.
- Retailers must upgrade point-of-sale systems before the cut takes effect, the ruling parties have pledged support for small farmers and restaurants facing revenue hits, and legislation is expected at an extraordinary Diet session in October.